Buffett's crafty move to boost Kraft's flagging share price

Warren Buffett, biggest shareholder in Kraft has gone public over his misgivings about the US food firms revised offer for Cadburys. Photograph: Andrea Comas /Reuters

What's Warren Buffett up to? His public statement of misgivings about Kraft's bid for Cadbury smells fishy. Buffett, Kraft's biggest shareholder, was under no obligation to declare how he might vote on the company's plan to issue 370m shares. The vote does not take place for another three weeks. And, if he was minded to slap down Kraft chief executive Irene Rosenfeld, he could have done so in private.

The revealing part was Buffett's line about reserving the right to change his vote to "yes" if he concludes that Kraft's final offer, due by 19 January, "does not destroy value for Kraft's shareholders".

In other words, Buffett committed himself to nothing. In effect, he warned Rosenfeld not to overpay and to confine any increase in the terms to cash. But he aired that opinion on US television several weeks ago. So there was little new in the statement apart from its impressive sense of theatre.

That, one assumes, was the point – it was an attempt to boost Kraft's flagging share price and to dampen the expectations of Cadbury's investors. The timing was perfect since Nestlé declared itself a non-runner in the race for Cadbury. The net result was that Cadbury's closed down 3% at 779p, which is not much above Kraft's offer, now worth 757p – the gap is as narrow as it has been at any point during this scrap. So, bravo, Mr Buffett, investors are still fascinated by your every word.

Rosenfeld should be embarrassed by some of the facts Buffett threw around (it is madness for Kraft to issue a bucket-load of shares at $27 after buying in stock at $33) but she won't grumble about his effort to talk up her share price.

What should Cadbury shareholders do? Wait until 19 January to see Kraft's final offer and ignore Buffett's self-interested musings. A fair price for Cadbury is still nearer 900p than 800p.